As Sam Lee prepares to deceive consumers with his newest Ponzi scheme, StableDAO, proceedings in Australia shed light on his first crypto schemes.
The Blockchain Global platform was a cloud mining platform. Thus, its economic strategy differs from StableDAO and Lee’s multiple Hyper* Ponzi scams.
What is significant about Blockchain Global is what occurred behind the scenes.
We already know that co-conspirators Lee (Samuel Lee, Xue Lee), and Ryan Xu created Blockchain Global (aka Zijing Xu).
Blockchain Global began as Bitcoin Group, a cryptocurrency exchange, and mining company.
The Bitcoin Group changed its name to Blockchain Global in 2016. In 2017, Blockchain Global created the cryptocurrency exchange ACX.
In 2020, Blockchain Global and ACX both failed. The next year, Xu and Lee escaped to Dubai.
Claims submitted by the liquidators place the losses of Blockchain Global and ACX at $49.1 million.
Xu and Lee’s presence in Dubai are hardly coincidental, as liquidators and, probably, law authorities were on their trail. The crime-ridden emirate is infamous for protecting con artists from law enforcement.
This week, the liquidation of Blockchain Global and ACX reached the Victorian Supreme Court. This has provided us with further insight into Lee’s con artistry.
Inadequate record-keeping, commingling of invested funds, misappropriation of investor cash for personal gain, and, eventually, loss of invested monies through gambling.
Sarah Danckert of the Sydney Morning Herald has been providing coverage of the events;
Wednesday, the court heard that Blockchain Global’s ACX exchange took customer-invested cash for cryptocurrency trading and combined it into a single pooled fund, a violation of client money reporting rules for licensed stockbrokers and trading groups but not for the largely unregulated cryptocurrency market.
Jin Chen, the chief technical officer of Blockchain Global, stated during cross-examination by counsel for the liquidators Andrew Silver on Wednesday that the business retained limited records of each customer’s trades and holdings.
Invested monies were mixed with the personal assets of Blockchain Global’s founder, a loan taken out against ACX’s customer balances (unbeknownst to clients), and supposed trading earnings.
Chen also told the court that he was ordered by Blockchain’s co-founder Allan Guo, who at various times served as the group’s chief operating officer and chief investment officer, to transfer bitcoin from the pool of client monies to other areas of the firm.
Other uses of customer cash comprised:
Investing in a cannabis-themed shitcoin, purchasing shares of a Canadian firm, funding the bank accounts of Blockchain Global’s founder and employees, and paying off the founder and employees’ mortgages.
Again, none of this information was shared with Blockchain Global and ACX customers.
Blockchain Global informed its clients that their funds will be kept in escrow while they traded on Blockchain’s ACX platform.
To escape regulatory notice, Lee and Xu established bank accounts in the names of non-business-related employee family members.
The court heard that Blockchain Global, despite being a successful exchange with thousands of users, was repeatedly “debunked” by several banks, which is when a bank ceases doing business with a customer because they are involved in the cryptocurrency sector.
Blockchain Global utilized firms established in the name of Guo’s mother and subsequently mother-in-law to facilitate the group’s banking procedure.
Guo further informed the court that Blockchain Global created a subsidiary in the name of Guo’s then-wife to secure an Austrac registration.
Allan Guo, alias Liang Guo, was Blockchain Global’s COO and CIO. In Australia, he and CTO Jin Chen were left holding the bag.
The inquiry against Blockchain Global is ongoing, but hearings before the Supreme Court imply that the damage estimate of $48.9 million is exceedingly cautious.
Under examination by counsel for liquidators Andrew Silver, former chief investment officer Allan Guo testified that large customer monies were transferred out of the company.
Silver questioned Guo, “What would you say if I told you that hundreds of millions of dollars had been removed in this manner from gateway accounts and then invested on other exchanges? Would it have been in the hundreds of millions?”
Guo said, “Absolutely.”
It would be stupid to believe that Xu and Lee’s HyperCash, HyperCapital, HyperFund, and Hyperverse Ponzi schemes were managed differently.
And, more importantly, given recent events, how will Lee manage StableDAO?
One of the key selling features of StableDAO is “prime bank capital protection by Citibank.”
To the degree that StableDAO interacts with CitiBank, I can ensure that neither “StableDAO” nor Sam Lee is disclosed.
Given that Lee and Xu have not yet been apprehended (Xu has not been seen in public since late 2021), it is hard to estimate overall victim losses since HyperCash.
Based on HyperFund’s size, I can make an educated calculation that consumer losses are well over a billion. And the majority of it is believed to have come from US-based investors.
Now, Lee intends to repeat the process using StableDAO.
You invest in STBL tokens, and Lee and his accomplices, early investors, and leading recruiters take your funds.
Because Australian authorities have no more influence over Dubai’s corrupt officials than American authorities, I am uncertain of the outcome of the Blockchain Global proceedings.
We will keep you informed of any noteworthy developments.
